Aramark Correctional Services, LLC v. County of Cook

The opinion of the court was delivered by: Matthew F. Kennelly, District Judge:

MEMORANDUM OPINION AND ORDER

Aramark Correctional Services, LLC, has sued Cook County in connection with the County's recent award of the food services contract for the Cook County Department of Corrections (DOC). The County issued a request for proposals (RFP), and the only two bidders were Aramark, which is the current contractor, and CBM Managed Services (CBM). The County awarded the contract to CBM.

Aramark has moved for a preliminary injunction barring the County from awarding the contract to CBM. The County has moved to dismiss Aramark's claims for lack of standing and failure to state a claim. The Court held an evidentiary hearing on the motion for preliminary injunction on September 5-6, 2012. For the reasons stated below, the Court denies the County's motion to dismiss and also denies Aramark's motion for a preliminary injunction. This constitutes the Court's findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a)(2).

Background

Aramark is the current food services vendor for the DOC pursuant to a contract that, following several extensions, expires on September 10, 2012. On October 17, 2011, the County issued an RFP to solicit proposals for a new DOC food services contract. The DOC, which is operated by the Cook County Sheriff, includes the Cook County Jail, a facility that houses approximately 9,600 inmates at any given time. Ex. 42 at 1 (Provision 1.1).

The Cook County Procurement Code allows the County to pursue an RFP process rather than competitive bidding when it is determined to be in the County's best interests to do so. Ex. 33 at 10 (Procurement Code § 34-138). The RFP process allows the County to negotiate with multiple bidders and allows consideration of qualitative factors in addition to the bid price. Id.

The RFP that the County issued for the food services contract gave instructions to bidders (Provision 4) and listed the requirements for submission of a proposal (Provision 7.2). Ex. 42 at 42, 60. RFP Provision 7.2.5 required bidders to "demonstrate good faith efforts" to satisfy the goals listed in the County's Minority and Woman-Owned Business Enterprises Ordinance (M/WBE Ordinance) and the RFP itself. Id. at 62. The RFP also described the criteria for evaluating proposals. Id. at 59 (Provision 6). In the RFP, the County "reserve[d] the right to waive or permit cure of non-material irregularities," including those that do not reflect "material change in the RFP." Id. at 56 (Provision 4.29).

Under the RFP, proposals were due on November 14, 2011. Only two companies, Aramark and CBM, submitted proposals in response to the RFP. CBM's utilization plan for minority and women-owned businesses stated that Airport Restaurant Management, Inc. (ARMI), which CBM said was a "Cook County Government-certified" minority-owned business enterprise (MBE), would serve as a subcontractor, providing thirty-six percent of the value of the contract. Ex. 50 at 901--05. CBM's utilization plan also included a letter of certification from the County's Office of Contract Compliance, which indicated that ARMI's certification would expire on March 16, 2012. Id. at 904.

Brandie Knazze, Deputy to the Chief Procurement Officer, testified at the preliminary injunction hearing that once the County received the proposals, it did an initial evaluation of each bid's compliance with the terms of the RFP. On December 21, 2011, Contract Compliance Director LaVerne Hall determined that CBM's utilization plan complied with the WBE and MBE goals set forth in the M/WBE Ordinance and the RFP. Ex. 11 at 2086.

Knazze testified that after the initial evaluation, an evaluation committee reviewed the proposals and established an initial score for each proposal. As directed by the RFP, the evaluation committee was composed of County and Sheriff's Department personnel. Ex. 42 at 56 (Provision 5.3). Sometime around December 19, 2011, both CBM and Aramark gave oral presentations and met with the County to clarify the terms of their proposals.

Knazze testified that the evaluation committee completed its evaluation on May 2, 2012 and recommended that the County award the food services contract to CBM. The committee issued a report detailing its findings and the process it followed in evaluating the proposals. Ex. 1A. The report discussed how the committee rated Aramark and CBM on each of the eight technical criteria listed in Provision 6.2 of the RFP. Ex. 1A at 2--9. The report also laid out the overall price proposed by each bidder. Id. at 9--10.

The evaluation committee determined that CBM had submitted a "Highly Qualified & Best Value Proposal" and that Aramark was "Less Qualified." Id. at 10. The committee also issued a scorecard of sorts, grading the proposals on each of the eight technical criteria and listing their price proposals. Ex. 1 at 788--89. The committee ranked CBM's proposal higher in every category except for "Financial Stability of the Proposer," giving Aramark an "Excellent" rating in that category and CBM a "Good" rating. Id.; see also Ex. 42 at 59 (Provision 6.2.6) (listing financial stability as one of the technical evaluation criteria). The committee's report recommended CBM for the contract award, noting that "the determining factor is [sic] the qualifications of the firm and the best value/pricing solution to the County." Ex. 1A at 10.

Knazze testified that based on the evaluation committee's recommendation, the County entered into negotiations with CBM on May 15--16, 2012. CBM withdrew its proposal on two occasions after that, and on June 28, 2012, the County entered into negotiations with Aramark. CBM then rescinded its withdrawal, and the County permitted it to re-enter negotiations. After concluding negotiations with both CBM and Aramark, County personnel recommended CBM for the contract award.

On July 6, 2012, Chief Procurement Officer (CPO) Lourdes Coss, Sheriff Thomas Dart, and Alexis Herrera, the chief financial officer of the Sheriff's Office, sent a request to the Cook County Board of Commissioners (County Board) for approval of the proposed contract with CBM. Ex. 19. At its meeting on July 10, 2012, the County Board referred the matter to the Finance Committee.

On July 18, 2012, Hall advised CPO Coss in writing that CBM's bid was "responsive to the service goals" listed in the RFP and the M/WBE Ordinance. Ex. 16 at 1152. Hall's memorandum to Coss listed the M/WBE firms that CBM planned to use, identifying the percentage of the contract's value attributable to each firm and the agency that had certified the firm as an M/WBE. Id. ARMI was the only MBE that CBM included in its utilization plan, see Ex. 50 at 901, and Hall's memorandum stated that ARMI had been certified as an MBE by the City of Chicago. Ex. 16 at 1152.

The Finance Committee approved the proposed contract on July 24, 2012 after conducting a hearing the day before that lasted approximately three hours. Ex. 17 at 10624. The contract between the County and CBM is currently scheduled to take effect at the end of the day on Monday, September 10, 2012.

During the course of the RFP process, CBM advised the County that if it were awarded the food services contract, it planned to assign the contract to CBM Premier Management, LLC (CBM Premier). Am. Compl. ¶ 24. CBM's CEO, Marlin Sejnoha, informed the procurement office on February 1, 2012, that CBM Premier was owned by two subcontractors, ARMI and The Buona Companies, LLC, along with a third company, HMS, LLC. Ex. 38 at 1320. Sejnoha stated that HMS "has experience in food service and restaurant management." Id. The County did not conduct any further investigation into HMS or its qualifications prior to making the contract award.

ARMI, a one-third owner of CBM Premier and the only MBE listed in CBM's utilization plan, is currently certified by the City of Chicago as an MBE. Ex. 50 at 901; Ex. 16 at 1152. Hall testified that ARMI had long been certified as an MBE by the County as well. In July 2011, however, the County Board changed its W/MBE Ordinance and requirements for certification. Ex. 33 at 38 (Procurement Code § 34-268). As of the date of the contract award at issue here, the County required a firm to be owned by an "economically disadvantaged" individual, defined as a person with a "Personal Net Worth less than $2,000,000.00." Id. at 34 (Procurement Code § 34-263). In connection with this lawsuit, ARMI's President and majority owner, Timothy Rand, submitted an affidavit affirming that his personal net worth exceeds $2 million. Ex. 52. It is therefore undisputed that ARMI does not currently qualify for certification by the County.

Hall testified that as a matter of practice, the Office of Contract Compliance does not do a thorough investigation of every subcontractor in a bidder's utilization plan until after a contract has been awarded. Instead, the Office's pre-award evaluation of a proposal's utilization plan consists of verifying that the subcontractors listed in the plan are currently certified by an identified agency and that the total level of commitment by those subcontractors meets the identified M/WBE goals. The Office of Contract Compliance did that in this case. Hall explained that she did not conduct a more detailed investigation into ARMI at this point in the process because, as a general rule, it would impede the overall RFP process were the Office to conduct a complete investigation of each M/WBE subcontractor in all submitted proposals.

Hall further testified that once a contract award has been made and the prevailing bidder's M/WBE utilization plan has been incorporated into the contract, the Office of Contract Compliance conducts a more thorough review to assess what actions are necessary to ensure each subcontractor's M/WBE status before actually including a firm as part of the contract's overall M/WBE participation. She testified that during this review, it is common for the contract awardee's utilization plan to be modified for various reasons. Hall did not regard these sorts of modifications as material variations with regard to the RFP, and there is no evidence to the contrary.

In her testimony at the hearing, Hall conceded that at the time she conducted the pre-award evaluation of CBM's proposal, she overlooked the difference between Cook County's M/WBE provisions, which require firms to be economically disadvantaged, and the City of Chicago's requirements, which do not. Thus despite ARMI's inability to qualify as a Cook County MBE, CBM's utilization plan was incorporated into its contract with the County, binding CBM to its commitment to use MBEs to provide thirty-six percent of the contract value. Ex. 17 at 5. Hall's oversight was brought to her attention (likely as a result of this lawsuit) by the time of an orientation meeting with CBM and CBM Premier staff on August 21, 2012. At that meeting, Hall told the CBM representatives that the Office of Contract Compliance needed ARMI to complete a "Personal Net Worth Statement," Ex. 3, before its utilization could be counted toward the W/MBE commitment in CBM's contract. A member of CBM Premier's staff asked Hall whether the company could use other MBEs to fulfill its obligations if ARMI could not qualify as a County MBE. Later that day, Hall wrote to ARMI's President, requesting financial documentation to ensure ARMI's compliance with the economic disadvantage requirement of the M/WBE Ordinance. Ex. 4. As indicated above, it is undisputed that ARMI does not meet that requirement and thus is ineligible for County certification. Ex. 52.

The evidence at the hearing established that the County and CBM are currently taking steps to rectify the defect in CBM's M/WBE utilization resulting from ARMI's inability to obtain County MBE certification. Ex. 55. The Court also notes that at the hearing, there was credible testimony that the fact that CBM's utilization plan proposed a higher percentage of M/WBE participation than the County's stated goals did not have a material impact on the recommended award of the contract to CBM.

As indicated earlier, the Court conducted a hearing on Aramark's motion for a preliminary injunction on September 5--6, 2012. Four County employees testified, including CPO Coss, Deputy CPO Knazze, Contract Compliance ...

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